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Revenue from Contracts with Customers | 9 Months Ended
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Sep. 30, 2025
Revenue from Contract with Customer [Abstract] |
Revenue from Contracts with Customers | Revenue from Contracts with Customers Contract Estimates Revenues for the majority of our contracts are measured using the over time, percentage of completion cost-to-cost method of accounting to calculate percentage of completion. We believe this is an appropriate measure of progress toward satisfaction of performance obligations as this measure most accurately depicts the progress of our work and transfer of control to our customers. Due to the long-term nature of many of our contracts, developing the estimated transaction price and total cost at completion often requires judgment. The estimated transaction price may include variable consideration such as performance incentives, requests for equitable adjustment (“REAs”) and claims. Variable consideration is included in the estimated transaction price only to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved. Factors that must be considered in estimating the cost of the work to be completed include the nature and complexity of the work to be performed, subcontractor performance and the risk and impact of delayed performance. After establishing the estimated total cost at completion, we follow a standard Estimate at Completion (“EAC”) process in which we review the progress and performance on our ongoing contracts on a routine basis. Adjustments to original estimates for a contract's revenue, estimated costs at completion and estimated profit or loss often are required as work progresses under a contract, as experience is gained and as more information is obtained, even though the scope of work required under the contract may not change and are also required if contract modifications occur. When adjustments in estimated total costs at completion are determined, the related impact on revenue and operating earnings are recognized using the cumulative catch-up method, which recognizes in the current period the cumulative effect of such adjustments for all prior periods. Any anticipated losses on these contracts are fully recognized in the period in which the losses become evident. Net EAC adjustments had the following impacts for the periods presented:
| Three Months Ended September 30, |  | Nine Months Ended September 30,
(Dollars in millions, except per share amounts) | 2025 |  | 2024 |  | 2025 |  | 2024
Revenue and operating earnings | $ | 5 |  |  | $ | (10) |  |  | $ | (4) |  |  | $ | (29) |
Total % of revenue | 1 | % |  | 1 | % |  | — | % |  | 1 | %
Net earnings | $ | 4 |  |  | $ | (8) |  |  | $ | (3) |  |  | $ | (23) |
Impact on diluted earnings per share | $ | 0.01 |  |  | $ | (0.03) |  |  | $ | (0.01) |  |  | $ | (0.09) |
The impacts noted above are attributed primarily to changes in our firm-fixed price development type programs. As changes happen in the design required to achieve contractual specifications, those changes often result in a change in the programs’ estimates and related profitability. Contract Assets and Liabilities The timing of revenue recognition, billings and cash collections results in billed accounts receivable, unbilled receivables (contract assets), and customer advances and deposits (contract liabilities) on the Consolidated Balance Sheets. Amounts are billed as work progresses in accordance with agreed-upon contractual terms, either at periodic intervals (e.g., biweekly or monthly) or upon achievement of contractual milestones. Generally, billing occurs subsequent to revenue recognition, resulting in contract assets. However, we sometimes receive advances or deposits from our customers before revenue is recognized, resulting in contract liabilities. Contract assets and contract liabilities as of the dates presented were:
(Dollars in millions) | September 30, 2025 |  | December 31, 2024
Contract assets | $ | 1,054 |  |  | $ | 872 |
Contract liabilities | 440 |  |  | 399 |
Revenue recognized in the nine months ended September 30, 2025 and 2024, that was included in the contract liability balance at the beginning of each period was $270 million and $275 million, respectively. Value of Remaining Performance Obligations The value of remaining performance obligations, which we also refer to as total backlog, includes the following components: •Funded - Funded backlog represents the revenue value of orders for products and services under existing contracts for which funding is appropriated or otherwise authorized less revenue previously recognized on these contracts. •Unfunded - Unfunded backlog represents the revenue value of firm orders for products and services under existing contracts for which funding has not yet been appropriated less funding previously recognized on these contracts. As of September 30, 2025, our total backlog was $8,909 million. We expect to recognize approximately 11% of our September 30, 2025 backlog as revenue over the next three months, with the remainder to be recognized thereafter. Approximately 50% of our total backlog relates to long-term contracts on electric power and propulsion programs with the U.S. Navy, which are expected to be recognized as revenue over a span of up to 15 years. Disaggregation of Revenue ASC: ASC revenue is primarily derived from U.S. government development and production contracts and is generally recognized using the over time, percentage of completion cost-to-cost method of accounting. We disaggregate ASC revenue by geographical region, customer relationship and contract type. We believe these categories best depict how the nature, amount, timing and uncertainty of ASC revenue and cash flows are affected by economic factors.
| Three Months Ended September 30, |  | Nine Months Ended September 30,
(Dollars in millions) | 2025 |  | 2024 |  | 2025 |  | 2024
Revenue by Geographical Region |  |  |  |  |  |  |
United States | $ | 500 |  |  | $ | 426 |  |  | $ | 1,411 |  |  | $ | 1,159 |
International | 77 |  |  | 101 |  |  | 213 |  |  | 282 |
Intersegment Sales | 3 |  |  | 6 |  |  | 9 |  |  | 17 |
Total | $ | 580 |  |  | $ | 533 |  |  | $ | 1,633 |  |  | $ | 1,458 |
Revenue by Customer Relationship |  |  |  |  |  |  |
Prime contractor | $ | 298 |  |  | $ | 200 |  |  | $ | 760 |  |  | $ | 616 |
Subcontractor | 279 |  |  | 327 |  |  | 864 |  |  | 825 |
Intersegment Sales | 3 |  |  | 6 |  |  | 9 |  |  | 17 |
Total | $ | 580 |  |  | $ | 533 |  |  | $ | 1,633 |  |  | $ | 1,458 |
Revenue by Contract Type |  |  |  |  |  |  |
Firm-Fixed Price | $ | 509 |  |  | $ | 446 |  |  | $ | 1,414 |  |  | $ | 1,198 |
Flexibly Priced(1) | 68 |  |  | 81 |  |  | 210 |  |  | 243 |
Intersegment Sales | 3 |  |  | 6 |  |  | 9 |  |  | 17 |
Total | $ | 580 |  |  | $ | 533 |  |  | $ | 1,633 |  |  | $ | 1,458 |
________________ (1)Includes revenue derived from cost-plus and time-and-materials contracts. IMS: IMS revenue is primarily derived from U.S. government development and production contracts and is generally recognized using the over time, percentage of completion cost-to-cost method of accounting. We disaggregate IMS revenue by geographical region, customer relationship and contract type. We believe these categories best depict how the nature, amount, timing and uncertainty of IMS revenue and cash flows are affected by economic factors.
| Three Months Ended September 30, |  | Nine Months Ended September 30,
(Dollars in millions) | 2025 |  | 2024 |  | 2025 |  | 2024
Revenue by Geographical Region |  |  |  |  |  |  |
United States | $ | 366 |  |  | $ | 277 |  |  | $ | 956 |  |  | $ | 796 |
International | 17 |  |  | 8 |  |  | 8 |  |  | 16 |
Intersegment Sales | — |  |  | — |  |  | — |  |  | — |
Total | $ | 383 |  |  | $ | 285 |  |  | $ | 964 |  |  | $ | 812 |
Revenue by Customer Relationship |  |  |  |  |  |  |
Prime contractor | $ | 136 |  |  | $ | 58 |  |  | $ | 236 |  |  | $ | 182 |
Subcontractor | 247 |  |  | 227 |  |  | 728 |  |  | 630 |
Intersegment Sales | — |  |  | — |  |  | — |  |  | — |
Total | $ | 383 |  |  | $ | 285 |  |  | $ | 964 |  |  | $ | 812 |
Revenue by Contract Type |  |  |  |  |  |  |
Firm-Fixed Price | $ | 359 |  |  | $ | 238 |  |  | $ | 855 |  |  | $ | 670 |
Flexibly Priced(1) | 24 |  |  | 47 |  |  | 109 |  |  | 142 |
Intersegment Sales | — |  |  | — |  |  | — |  |  | — |
Total | $ | 383 |  |  | $ | 285 |  |  | $ | 964 |  |  | $ | 812 |
________________ (1)Includes revenue derived from cost-plus and time-and-materials contracts.

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- Definition The entire disclosure of revenue from contract with customer to transfer good or service and to transfer nonfinancial asset. Includes, but is not limited to, disaggregation of revenue, credit loss recognized from contract with customer, judgment and change in judgment related to contract with customer, and asset recognized from cost incurred to obtain or fulfill contract with customer. Excludes insurance and lease contracts. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Topic 606 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 7 -Publisher FASB -URI https://asc.fasb.org/1943274/2147479806/606-10-50-7 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Topic 606 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 9 -Publisher FASB -URI https://asc.fasb.org/1943274/2147479806/606-10-50-9 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Topic 606 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 10 -Publisher FASB -URI https://asc.fasb.org/1943274/2147479806/606-10-50-10 Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Topic 606 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 15 -Publisher FASB -URI https://asc.fasb.org/1943274/2147479806/606-10-50-15 Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Topic 606 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 12 -Subparagraph (a) -Publisher FASB -URI https://asc.fasb.org/1943274/2147479806/606-10-50-12 Reference 6: http://www.xbrl.org/2003/role/disclosureRef -Topic 606 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 12 -Subparagraph (b) -Publisher FASB -URI https://asc.fasb.org/1943274/2147479806/606-10-50-12 Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Topic 606 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 12 -Subparagraph (c) -Publisher FASB -URI https://asc.fasb.org/1943274/2147479806/606-10-50-12 Reference 8: http://www.xbrl.org/2003/role/disclosureRef -Topic 606 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 12 -Subparagraph (d) -Publisher FASB -URI https://asc.fasb.org/1943274/2147479806/606-10-50-12 Reference 9: http://www.xbrl.org/2003/role/disclosureRef -Topic 606 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 12 -Subparagraph (e) -Publisher FASB -URI https://asc.fasb.org/1943274/2147479806/606-10-50-12 Reference 10: http://www.xbrl.org/2003/role/disclosureRef -Topic 606 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 13 -Subparagraph (b)(2) -Publisher FASB -URI https://asc.fasb.org/1943274/2147479806/606-10-50-13 Reference 11: http://www.xbrl.org/2003/role/disclosureRef -Name Accounting Standards Codification -Topic 606 -Publisher FASB -URI https://asc.fasb.org/606/tableOfContent + Details
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